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New CA Court of Appeal Opinion Re: Attorney-Client Conspiracy Statute

The California Court of Appeal, Second Appellate District, Division One (Los Angeles), published its opinion in Klotz v. Milbank, Tweed, Hadley & McCloy (2015) 238 Cal.App.4th 1339, analyzing the application of section 1714.10, the attorney-client conspiracy statute, to causes of action not based on conspiracy when the complaint also alleges conspiracy. The Court of Appeal held that section 1714.10 applies only to causes of action based on conspiracy.

Defendant attorney Deborah Festa (“Festa”) represented SageMill Partnership (“SageMill”) without a formal written engagement agreement. SageMill consisted of three partners, Stephen Bruce (“Bruce”), Adam Klotz (“Klotz”) and Richard Spitz (“Spitz”). Festa provided legal advice to Bruce that was adverse to SageMill without informing Klotz and Spitz or obtaining their written consent to do so. SageMill, Klotz and Spitz (collectively “plaintiffs”) sued Festa and her firm (collectively “defendants”) for breach of fiduciary duty, conspiracy, and legal malpractice. Defendants’ demurred to the first amended complaint pursuant to Civil Code section 1714.10 (“section 1714.10”) as to allegations by Klotz and Spitz. The court overruled the demurrer finding plaintiffs alleged an implied agreement between defendants and the individual plaintiffs not to engage in any representation adverse to them. Defendants appealed. 
              
The Court of Appeal reversed in part and affirmed in part. It held that a plaintiff must obtain a prior court order before filing an action against an attorney that includes a claim for civil conspiracy with a client arising from any attempt to settle a claim while representing the client. Section 1714.10 prohibits the unauthorized filing of an action for nonexempt civil conspiracy against an attorney based on conduct arising from the representation of a client that is in connection with any attempt to contest or compromise a claim or dispute. However, failure to obtain pre-filing approval of conspiracy claims does not warrant dismissal of other claims not requiring pre-filing approval. The Court of Appeal reversed ordering the trial court to strike plaintiffs’ second cause of action for conspiracy because plaintiffs failed to allege any duty beyond the duty inherent in the rendition of services of an attorney to a client. Further, it did not allege any financial gain that goes beyond compensation paid for professional legal services. However, in the unpublished portion of the opinion, the Court of Appeal affirmed the trial court’s order as to the remaining causes of action for breach of fiduciary duty and legal malpractice because those causes of action do not rely on conspiracy allegations. 

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